As the month of May nears completion there is a compelling reason to think that the cause and effect built recently in global market trade is about to create a price action break-out to rival anything seen this year. Inflection points have been created recently on equity, commodity, and currency markets after sentiment and momentum were unable to generate price action to break either support or resistance.
The question is, will the next move be a bounce off support or a reversal lower, and will most traders and investors be ready?
The global market fundamentals have not changed recently from what was in place earlier in the year. The same headlines being attributed to the current weakness in equities are similar to those that were ignored when the S&P 500 (1315) hit its yearly high at 1373, on May 02 11.
TheLFB trade desk issued signals to clients on Friday May 20 11 to sell the S&P 500 from 1333, targeting 1328, and 1315. That cycle has now completed, and investors may be interested to know that another opportunity is forming, this time with a break below 1305.
If the next leg of global trade is going to be the buying of equities then traders will need to see a weekly S&P 500 close above 1327, which will target 1340. However, a move higher will now have to generate a lot of momentum to be easily able to hold, as the market mechanic detail below explains.
Full detail will be sent out as the target areas and trade potential are confirmed.
The inflection point will be fed by plenty of fundamental and technical information, and detail will be sent to clients as confirmation is seen. The data is starting to stack up, including the fact that over 50% of NYSE stocks are currently trading below their 50-day simple moving average (SMA) areas, and insider selling-to-buying ratios show a dramatic leaning towards the short side of the market.
The financial sector ETF (XLF) (15.50) remains nearly 3% lower than it started the year and has underperformed the market by 765 basis points. The XLF has broken the 200-day SMA area at 15.55 and is struggling to easily move higher.
TheLFB signal service issued a sell signal on XLF earlier in May which broke lower from 16.25, targeting 16.15, and 15.90. The original signal completed its run, and does not now have any time-frame chart signaling anything other than further sustained weakness.
10-year Treasury yield and banking stocks dropping in tandem while gold moves higher in-line with US dollar buying does not indicate a positive outlook for yields or the financial sector. A long signal to buy 10-year (ZBM1) (125.25) Treasury notes (which move inversely to 10-year yield values) was created on Apr 04 11 with a break of 120.00.
As of writing, the ZBM1 follow through has yet to create a reversal signal, either to close the long position or initiate a short position. It would seem that note values have room to move higher, in-line with yields having room to move lower.
The emerging market ETF (EEM) (46.50) is 8% off the yearly high and about to break the 200-day SMA area at 46.00. A sell signal will be formed with a Daily chart break of 46.40, which targets 46.00 and 45.50. If the emerging markets follow Wall Street, London, and Frankfurt lower, the short selling pressure, to either close year-to-date long positions or initiate new short positions, will build exponentially.
The UK FTSE (5858) equity index is 1% below the Jan 01 11 opening price, and has just created a Daily chart signal to sell the index down to the 200-day SMA area at 5780. Targets underneath that area will include 5710 and 5650.
The German Dax (7150) also just signaled on the Daily chart to sell the index lower with a break of 7115, which targets 7100 and then 7025 if global equity indices momentum builds to the short side.
The potential weakness in Apple (AAPL) and Microsoft (MSFT) highlighted in this article transposed itself into AAPL trading down 1.5%, having dropped as much as 2.5% after the potential weakness was highlighted.
MSFT will create a Monthly chart sell signal with a break of 24.10, which could target 23.00; an area initially broken as resistance in June 1998. The original MSFT sell signal has completed its targets, and detail will be sent to clients when confirmation is seen that the next leg lower is happening.
The bullishness in gold bullion (1525) was highlighted in the latest client note that looked for buying pressure increasing with a break above 1505, which would target 1515 and 1520. The same bullishness was confirmed in silver (36.65) trade with a break above 35.40, which has already hit initial target areas of 36.50. Clients will receive an in-depth bullion review overnight that highlights further potential in gold and silver trade.
A near-term sell signal on the dollar index (76.05) with a break below 75.80, which initially targets 75.35 reveals just how disjointed the global markets are at this time, and adds further fuel to the cause and effect for a global market break-out that will be sustainable. Frustration will be felt by those traders and investors stuck watching things unfold overnight, while being unable to access the initial momentum flows.
The fact that globalization has created a 24-hour traded market should not be an impediment; in reality it should be embraced because finally retail traders and investors have a level playing field to work from. It has been a long time coming, but global market access is now available to all and TheLFB subscription service has been tailored over 30 years of global trade experience to support all those who want to partake.
Investors who do not want to wait for their regional cash market to open, or do not have 24-hour access to the market they have open positions in, are able to access the 24-hour currency market. Signals will be issued to clients as the above potential unfolds, along with alternative forex-based signals for those stuck trading in the regional 9-to-5 cash session.
With momentum building across so many asset classes the next moves are likely to be substantial in nature, and will cascade across the global 24-hour trading arena.
There is potential to analyze and trade currencies in a high-volume market that is supported by the global inter-bank system. Investors can trade currencies in-line with a rising global market, or trade ahead of a falling cash market open. Being able to use currencies offers the opportunity to be in a trade before the regional market opens.
An example of alternative trading potential is highlighted in the article posted on Friday detail of which allowed investors and traders the ability to trade S&P500 momentum ahead of the Wall Street open.
TheLFB’s Trading Global Momentum course has nine spaces left available. It has been designed for equity traders and investors to learn how to get ahead of the global momentum curve. Don't miss another move while waiting for the opening bell. Learn the institutional impact of gold, silver, and oil global trade momentum on your portfolio, and how best to monetize it.
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